NJ approves $700M in new taxes, set to OK borrowing on Monday
TRENTON — State lawmakers approved a $32.7 billion, nine-month spending plan and more than $700 million in higher taxes Thursday, clearing the way for the time-shifted 2021 state budget to be enacted before next Wednesday’s deadline.
The final piece of the puzzle will come Monday, when lawmakers on the Select Commission on Emergency COVID-19 Borrowing will meet to approve the borrowing of $4.5 billion to help balance the budget, which spends more than the 2020 budget despite a sudden drop in tax collections.
Democrats touted the plan for creating new income-tax rebates of up to $500 for families making as much as $150,000, as part of the bill raising the millionaires tax. Nearly 800,000 households that have dependent children will qualify, though some with lower incomes will get less than $500.
“Too many middle class people are at the breaking point, and they’re looking to us for help,” said Assembly Speaker Craig Coughlin, D-Middlesex.
The new rebates aren’t actually in the new budget, as they won’t be paid until next July, which is the first month of 2022 fiscal year.
“People need money now. Next summer, they’re going to be a lot better off,” said state Sen. Sam Thompson, R-Middlesex. “So if there were rebates, they should be now, not then.”
“This bill is a sham,” said Assemblyman Jay Webber, R-Morris. “It’s a political ploy to get through a millionaires tax that the governor’s wanted since the day he got into office. The speaker and the Senate president saw an opportunity to get the millionaires tax with a little bit of spoonful of sugar. It’s not going to make the medicine go down.”
The millionaires tax, which will be retroactive to Jan. 1, is expected to generate $390 million in tax revenue for the state. An extension of a corporation business tax surcharge is forecast to generate $210 million. An increased tax on HMO premiums is forecast to yield nearly $103 million.
“Gov. Murphy ran on a platform promising to raise our taxes, and, boy, has he delivered,” said state Sen. Anthony Bucco, R-Morris.
Democrats said the $4.5 billion in borrowing will help avoid drastic spending cuts as the economy recovers from shutdowns ordered to blunt the spread of the novel coronavirus. It will also help provide a projected $2.5 billion year-end surplus next June – and a cushion if COVID-19 roars back this winter.
“A $2.5 billion surplus puts the state in a better position to withstand what has been recommended by healthcare experts across the country as a more significant and devastating wave, with the combination of the flu season and this virus,” said Assembly Majority Leader Louis Greenwald, D-Camden.
The budget passed with just one Democratic defection, as Assemblyman Roy Freiman, D-Somerset, voted to abstain. All 77 Democrats supported the millionaires tax; one opposed, two abstained and four skipped the vote on the HMO tax hike; and 11 opposed, one abstained and two skipped the vote on the corporate tax surcharge.
State Sen. Paul Sarlo, D-Bergen, said that some of Murphy’s proposed tax increases were blocked but that overall, the year is one to forget. He said there should be action on government reforms, such as the Path to Progress report, in 2021.
“This crisis should be taken as a tipping point, as well, that will spur action on cost-cutting reforms,” Sarlo said.
Senate Minority Leader Tom Kean Jr., R-Union, said this year’s budget was “a wasted opportunity” for such changes. State Sen. Steve Oroho, R-Sussex, said the time for such changes was 25 to 30 years ago, not 2021.
“For many, many years – many, many years – unfortunately on a bipartisan basis, this state has been driven into almost fiscal ruin,” Oroho said.
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